According to industry media, Russian Federation aluminum giant UC Rusal is considering selling primary aluminum directly to the London Metal Exchange as the company continues to have difficulty identifying buyers.
Although Rusal is not directly under sanctions, the company has faced fierce retaliation from European and American buyers, as many have severed their ties with all things Russian. Additionally, Rusal’s continued association with its founder and former leader Oleg Deripaska continues to be problematic due to his close association with Russian President Vladimir Putin.
In order to get its primary aluminum to market, the company plans to ship some of its inventory in Vladivostok to various LME warehouses in Asia. This was the message conveyed to Bloomberg News earlier this week by unidentified sources claiming to have inside knowledge of the situation.
The sources went on to say that Rusal will first send small test shipments to avoid flooding the market and driving prices down. Selling metal in the market directly from a large producer, known as “direct collateral”, is rare for this reason. This is also the reason why the main LME warehouses are not in countries with large aluminum smelting capacities, because the tendency of these countries to dump their excess production directly on the exchange would be too great.
Rusal is under significant pressure to find new buyers for its primary aluminum. Besides the backlash from foreign buyers, sales in Russia have been hit hard lately as demand has been weighed down by the general recession in Russia.
The LME said it will monitor the situation in the future and has not noticed any such moves by Rusal or any other aluminum producer. However, LME aluminum warehouses have seen an increase in stored stock in recent weeks, but inside sources say these shipments came from Indian suppliers and not from Rusal.